Financing Strategic Infrastructure: The Resilience Imperative

ABOUT THIS SERIES

Financing Global Resilience: Infrastructure and Capital in a Multipolar Order is a four-part series on how the infrastructure of international trade is financed, and on what that financing means for the security of the states that depend on it. Ports, railways, shipping lanes, pipelines, energy terminals and undersea cables carry the goods, energy and information that national economies run on. Access to them can no longer be assumed.

From the early 1990s until the late 2010s, this infrastructure was largely left to markets. Trade found its way, and the arrangements underneath it were rarely a matter of state. That has changed. Disruption in recent years has shown how quickly access can narrow, and how much of a country's economic life can rest on a small number of routes it does not control.

Governments are now responding, and the responses are costly. Building alternatives means committing public money to capacity that may never be needed, and persuading private investors into projects whose value is hardest to demonstrate in ordinary times. Those decisions are being taken in most regions of the world at once, and together they will shape how open, or how divided, the next stage of the international economy turns out to be.

This series asks how those choices are made and who carries their cost. They are questions of trade, law and security at the same time, which is the ground this Council works on. They also tend to be handled separately, in economic policy on one side and strategic affairs on the other. The series sets out to treat them as a single question.

PART 1 OF 4

Economic security rests on a smaller number of routes than is generally appreciated. Continued disruption across the Black Sea, heightened risk around the Strait of Hormuz and intensifying competition over Arctic trade routes have each made that dependence plain. Conflict, sanctions and export controls, together with restrictions on shipping, payments and insurance, have raised both the cost and the complexity of maintaining access. Governments and investors are now reconsidering where alternative infrastructure is needed, and how it should be financed, insured and kept in working order.

Against this background, the paper poses one central question: How should strategic infrastructure be financed to strengthen global resilience and economic security in a multipolar order? Two supporting questions follow: What roles should sovereign, state-backed, and private capital play in financing strategic infrastructure and redundancy? Under what conditions do these financing strategies support connectivity and economic development rather than deepen geopolitical competition? Underlying both is a central tension: infrastructure capacity that appears uneconomic in normal conditions can become indispensable during disruption.

Strategic infrastructure comprises assets whose disruption would weaken economic security or cross-border flows: ports, railways, shipping routes, pipelines, energy terminals, and undersea cables. In an economically multipolar order, these assets connect competing centers of capital, production and demand. Critical dependencies include but are not limited to Black Sea routes, the Turkish Straits, Suez Canal, Bab el-Mandeb, Strait of Hormuz, and Strait of Malacca.¹ Because they cross jurisdictions, resilience often depends on cooperation among states, operators, and capital providers.

Before February 2022, Russia and Ukraine supplied about 30% of global wheat exports; Ukraine accounted for 15% of global maize exports; and Russia for about 20% of fertilizer exports. Ukraine's monthly grain exports fell from 6 million metric tons to 322,000 in March 2022 and 18 million metric tons remained in storage as alternative routes lacked maritime capacity.² By July 2026, Black Sea ports handled about 80% of Ukraine's grain and oilseed exports, while Russian sources put Black Sea and Azov ports above 70% of Russia's grain shipments. Further exports from this region remain highly dependent on maritime capacity.³

The Strait of Hormuz concentrates energy trade: 20% of global petroleum-liquids consumption, 25% of seaborne oil trade and 20% of LNG trade.⁴ Yet, as Jason Bordoff and Meghan O’Sullivan argue, the resulting global economic impact has so far been less severe than that of the 1973 oil crisis, reflecting more diversified supplies, lower oil intensity and the use of strategic reserves.⁵ This resilience has limits: in August 2026, Gulf war-risk insurance was quoted at 3%-6% of vessel value, against approximately 0.25% in peacetime – a twelve- to twenty-four-fold increase. Even an open route can therefore become commercially difficult to use. These pressures are forcing stakeholders to reassess policies and strategic partnerships, while taking immediate steps to preserve access, manage insurance costs, and develop alternative capacity.

Governments have responded by strengthening networks and developing alternative corridors, which differ in maturity, financing and resilience value. The Middle Corridor crosses Kazakhstan, the Caspian Sea, Azerbaijan, and Georgia, continuing through Türkiye or Georgian Black Sea ports – it diversifies containerized trade but cannot replicate Black Sea bulk exports.⁶ Saudi Arabia’s freight network reaches Al-Haditha, but extension into Jordan requires agreement on financing, access and operation.⁷ Etihad Rail's eastern extension was designed to connect Fujairah and Khorfakkan ports to the UAE network, providing access outside the Strait of Hormuz. And Hafeet Rail – a joint venture of Etihad Rail, Oman Rail and Abu Dhabi sovereign investor Mubadala – is being developed between the UAE network and Sohar Port. It is a financed, sovereign-sponsored cross-border project still under development, and demonstrates sovereign support for cross-border infrastructure.⁸

Together, these cases demonstrate that investment alone does not create strategic redundancy. Governments must establish a business case, operating arrangements, and risk allocation required to attract private capital and keep alternative capacity usable during disruption.

The counterargument is that redundancy carries significant financial and opportunity costs. Capital committed to underutilized alternative routes may generate low returns and cannot easily be redeployed, while fiscal constraints may limit governments’ ability to support them when a crisis occurs. Such projects may also fragment trade across competing networks and replace one dependency with another, e.g., on new transit states, operators, financiers, or insurers. The question is therefore not whether more infrastructure is always desirable, but which capacity provides sufficient resilience value and how costs and risks can be shared.

Therefore, the working hypothesis is that strategic infrastructure strengthens resilience when financing recognizes system-wide benefits, allocates risks to those best able to bear them and combines state-backed support with private capital. Ownership and legal rights alone do not ensure resilience when access, operation, and insurance depend on actors outside state control.

WHY ISN’T CONVENTIONAL FINANCING ENOUGH?

Strategic redundancy means having alternative routes, reserve capacity and diversified networks available when primary systems fail. Project revenues do not capture the value of avoiding disruption, so conventional financing may not be enough.

Sovereign capital can finance project preparation and provide patient, long-term funding, but should still be guided by national strategic and economic development priorities. Subsidies can close viability gaps, while guarantees and insurance cover risks beyond private investors’ control. Private capital should bear risks it can price and finance commercially viable components. Hafeet Rail, for example, shows how sovereign sponsorship can mobilize $1.5 billion of project-finance debt.⁸ Subsidies should be disclosed and budgeted, while guarantees and state-backed insurance should cover defined risks, carry an appropriate fee, and be capped to limit government contingent liabilities.⁹

Operating assets can also recycle sovereign capital. For example, Aramco's $11 billion Jafurah and $15.5 billion gas pipeline transactions used 20-year leasebacks to raise capital while preserving Aramco's 51% ownership and operational control. They nevertheless created long-term payment, counterparty, and insurance obligations.¹⁰

The role of insurance deserves particular attention. As insurance can determine whether infrastructure remains commercially usable during a crisis, it should form part of sovereign resilience planning. Without adequate war, political-risk, marine or business-interruption cover, lenders may withdraw funding, operators may suspend services and even routes that are physically available may become unusable. Therefore, building domestic underwriting capacity gives countries greater control over the availability of essential insurance cover and allows a larger share of premiums and reserves to remain within the national economy. Regional risk pools and international reinsurance can absorb some exposures that would be too large or concentrated for domestic insurers alone. However, over time, the assets accumulated by insurers can provide long-term funding for domestic bonds and infrastructure, supporting capital-market development – provided investment tenors match insurance liabilities and solvency standards remain robust.

A PROVISIONAL ANALYTICAL LENS

This paper introduces a provisional framework, which subsequent installments will test and refine, for assessing how project financing, ownership and cross-border arrangements affect the resilience of infrastructure projects:

1. Financing imperatives: What purpose and risks justify state support?

2. Sovereign and private capital: Which risks should each bear?

3. Bankability: What is needed to reach financial close?

4. Ownership and control: How do they affect access and leverage?

5. Legal and geopolitical alignment: Will access remain protected during a crisis?¹¹

6. Strategic outcomes: Does financing strengthen connectivity or create dependency?

CAPITAL AND POLICY PRIORITIES

Where project revenues are insufficient to attract private capital, availability payments and minimum-volume commitments can provide predictable cash flows. Sovereign first-loss capital can absorb initial losses, while guarantees transfer defined risks and reduce financing costs. For example, Saudi EXIM and SIDF can provide project financing and export-credit support within their mandates.⁹

Cross-border projects require agreements on access, customs, technical specifications, security, traffic commitments, guarantees and dispute resolution. Therefore, durable political alignment is an intrinsic financing condition: states must credibly commit to preserving operations during a crisis.

Where countries share the benefits of a trade corridor, they could establish common funding and insurance mechanisms leveraging sovereign and private capital pools. Once projects generate stable cash flows, they may access infrastructure bonds, securitization, and leaseback structures. The objective is not to eliminate dependencies, but to make them diversified and manageable.

This leaves the central financing question: who should pay for capacity that appears uneconomic in normal conditions but becomes indispensable during a crisis? The next paper, “Who Pays for Strategic Redundancy?”, will examine the respective roles of sovereign, state-backed, and private capital, including risk allocation, guarantees, and mechanisms for mobilizing private investment. “Financing Strategic Corridors: Connectivity, Statecraft, or Dependency?” will test the emerging conclusions against selected corridor cases. The final paper will synthesize the research into a practical framework for strengthening resilience alongside national development priorities.

NOTES

1. U.S. Energy Information Administration, World Oil Transit Chokepoints (3 March 2026) 2. FAO, Ukraine-Russia Conflict: Food and Agriculture (2022); USDA Foreign Agricultural Service, Ukraine, Agricultural Trade and Food Security; FAO, Ukraine Grain Storage and Exports (5 July 2022) 3. European Commission, Solidarity Lanes Figures (July 2026); Interfax, Russian Black Sea and Azov Export Hubs (25 August 2026, Russian); BFM.ru, Russian Domestic Wheat Prices (5 August 2026, Russian); BFM Kuban, Russian and International Wheat Prices (19 August 2026, Russian); Central Bank of Russia statistics 4. Oliver Wyman, Middle East Conflict and Global Supply Chains (March 2026); Wall Street Journal, Gulf and Red Sea Insurance Costs (25 August 2026) 5. Jason Bordoff and Meghan L. O'Sullivan, "The Long Shadow of the Iran Shock," Foreign Affairs, 14 August 2026 6. World Bank, The Middle Trade and Transport Corridor (2023); OECD, Enhancing the Competitiveness of the Trans-Caspian Transport Corridor in Central Asia (2025) 7. Saudi Press Agency, SAR Launches International Logistics Corridor Linking Gulf Ports with Jordan (26 March 2026); Emirates News Agency, Etihad Rail Awards Package D Linking Fujairah and Khorfakkan Ports (18 December 2019) 8. Standard Chartered, Hafeet Rail $1.5 Billion Financing (28 February 2025) 9. World Bank, Using Government Guarantees Carefully; Saudi EXIM, About the Bank; Saudi Industrial Development Fund, Financial Solutions 10. Aramco, $11 Billion Jafurah Midstream Deal (2025); Aramco, $15.5 Billion Gas Pipeline Deal (2021) 11. United Nations Convention on the Law of the Sea, Part III: Straits Used for International Navigation